Q3 2022 Fulgent Genetics Inc Earnings Call
Hello, and welcome to the Fulgent Genetics Q3, 2022 earnings conference call. At this time all participants are in a listen only mode. If anyone should require operator assistance. Please press star zero on your telephone keypad.
Sure and answer session will follow the formal presentation. As a reminder, this conference is being recorded.
My pleasure to turn the call over to your host Melanie Solomon Investor Relations. Please go ahead.
Good afternoon, and welcome to the Fulton Genetics third quarter 2022 financial results Conference call today will be we will also be discussing the acquisition of <unk> announced after the market closed in a separate press release.
On the call are named Shea Chief Executive Officer of Paul then genetics.
Kim Chief Financial Officer, and genetics, Brandon <unk>, Chief commercial officer, and genetics, Lawrence <unk>, Chief Medical Officer, Fulton Genetics, and Dr. Ray <unk>, President and Chief Scientific officer of Belgian pharma companies.
The company's press release discussing these two announcements are available on the Investor Relations section of our website Holden genetics dotcom.
Webcast portion of this call contains a slide presentation that bill referred to during the call. Those following along on the phone who wish to access the slide portion of this presentation may do so on the Investor Relations section of our website.
Access to the streaming portion of the webcast. Please be aware that there may be a few seconds delay and that you will not be able to pose questions via the web replay of this call will be available. Shortly after the call concludes on the Investor Relations section of the company's website.
Management's prepared remarks and answers to your questions on today's call will contain forward looking statements. These forward looking statements represent managements estimates based on current views and assumptions, which may prove to be incorrect. As a result matters discussed in any forward looking statements are subject to risks uncertainties and changes in circumstances that may cause actual results to differ from those describe.
And the forward looking statements.
The company assumes no obligation to update any of the forward looking statements. It may make today to reflect actual results or changes in expectation listeners should rely on any forward looking statements as predictions of future events and should listen to management's remarks today with the understanding that actual results, including the company's actual future results may be materially different than what is described in or implied by these.
Forward looking statements.
Please review the more detailed discussions related to these forward looking statements, including the discussions of some of the risk factors that may cause results to differ from those described in these forward looking statements contained in the company's filings with the Securities and Exchange Commission, including the previously filed 10-K for the year ended December 31, 2021, and subsequently filed reports which are available on the comps.
<unk> Investor Relations website.
Management's prepared remarks, including discussions of earnings and earnings per share certain financial measures not prepared in accordance with accounting principles generally accepted in the United States or GAAP.
Management has presented these non-GAAP financial measures because it believes they may be useful to investors for various reasons, but they should not be viewed as a substitute for or superior to the company's financial results prepared prepared in accordance with GAAP.
Please see the company's press release today discussing its financial results for the third quarter of 2022 for more information, including the description of how the company calculates non-GAAP income and earnings per share and a reconciliation of these financial measures to income and earnings per share the most directly comparable GAAP financial measures.
With that I'd now like to turn the call over to Mig.
Thank you very much.
Good afternoon.
Joining our call today to discuss.
Our third quarter 2072 result.
And the acquisition.
Bob.
I will start with some comments on the transaction and then my vision for Cogent.
Before turning the call over to my co founder Dr.
<unk>.
And then Brendan will review our products and the go to market update.
From the third quarter.
And Paul will conclude with financial outlook before we take your questions.
Yeah.
I am pleased to announce that we have a quite Fujian province.
Company I have been running with my co founder Dr. <unk>.
Private entity.
This acquisition has a petition.
Potential to rapidly transition transform forging genetics from a genetic diagnostic service business into a fully integrated precision medicine countries.
<unk> oncology.
Well also.
Our cumulative pilots individuals into really our companies to address the continuum of care that we believe beginning with diagnosis.
And with patient care.
Yeah.
Let me take a step back and provide a brief of Q3 of these two companies.
Bringing on these timelines from Us foods.
Farmer.
And the 400 <unk> were previewed both owned by the Fujian Therapeutics.
<unk> 2016.
When the business. We're separate ahead of initial public offering of <unk> genuity.
The company has operated as a separate entity since 2016.
Easily each business to focus on and our scale.
This causes genetic testing in the therapeutics.
Over the last year.
<unk> genetics has taken major steps to separate a foothold in the large marketable oncology testing.
Most notably with acquisition of CSI luxuries.
In August 2021, and the opening of the seat of oncology testing facility in Southern California in May 2022.
We believe with the platform we have built.
It was informed diagnostics and CSA my garage is uniquely positioned to television where full suite of genomic testing capabilities to our bio pharma clients.
We have been building business sequencing as a series of businesses over the last few years and we've seen a meaningful opportunity to continue expanding these operations in the years ahead.
As we build up on our genetic testing capabilities to offer a more comprehensive suite of services to our customers. We also recognized the both therapeutics industry and our pharma business.
Benefits from the learning and expertise.
Ags and genomics.
Cogent farmer has the well, but novel nano exacerbation and target therapy platform technology designed to improve the therapeutic window and the pharma coating.
<unk> profile of both new and existing cancer drugs.
Based on the current study and our.
Design the criteria, we believe our lead drug Kennedy <unk>.
Oh seven has achieved proof of concept of treating them awful numerous cancers, including head and neck, and pillory pancreatic lung and breast.
As presented at <unk> 2021.
Both farmer and stack analysis.
Well validated technology platform in the Thailand is assigned.
Thanks.
We're already taking a new and existing challenge in precision medicine and the patients here.
We believe bringing visit two entities effect together will unlock significant long term upside for both pharma and diagnostics business well.
Efficiently most current and future risks.
Our vision of a Fujian.
It has always been to build a vertically integrated solution to potentially help patients.
And overcome cancer.
No no no drug delivery technology platform Synergistically underpinned the combined business and the hub will create a more sustainable and profitable business model in precision medicine for years to come.
With a large database from our diagnostics business and the deep drug candidate pipeline from farmers drug delivery platform, we can potentially bring more effective therapy.
Precision medicines.
Mitigating risk.
Risks.
Our near term opportunity, including using.
<unk> bio will be two new drug submission, possibly to potentially shorten development timelines and the long term.
We believe we can leverage our insights from the diagnostic business to enable precision medicine through organic or partner development strategies.
This combination Fujian farmer will be integrated with genetics, adding 30 people a language or the Phd scientists.
Booster.
Our already existing basal more than 100.
Pathology Genesis and the Phds.
With this combination.
Our head count is well over 1000 people.
Spanning office in California, Texas.
Resona, Georgia, Florida, Massachusetts, and New York.
We believe with this capability along with the strong transportation over <unk> genetics.
We will continue to invest in this combined business, while managing potential risks.
This business combination and our mission to build a vertically integrated platform to provide comprehensive service and solutions across the cancer care continuum.
Equally early detection.
<unk> monitoring as low as a drug discovery and development.
Progress of each business has made to date in April each other with the technology and the insights toward a common goal of improving continuum of care for patients.
We believe we are well capitalized to catch a pharma pipeline with no additional financing both dilution to shareholders.
The efficient the research program in place as well as the manufacturing capabilities that may leverage for both side of the business.
Overcome your potential future hurdles over drugs.
We already have a team in place the combination of the two business Diversifies our excess.
Assuming regulatory approval quite a significant future revenue opportunities and the margin.
Opportunities to look at with target market.
Before I turn work too right.
I want to highlight the targeted markets. We have chosen for the pharma business is a large and well established we believe we'll have opportunity to capture a portion of this is market through indications that would have protrusion to focus on.
Data from the completed ongoing.
Studies of our current drug candidate developed with our novel drug delivery technology hire private early evidence that some of these candidates may be.
Able to achieve.
The target indications, where PD, we have a potential to bring some <unk>.
Exciting drug candidates to the market.
Playful.
Now I would like to introduce <unk> My co founder.
And the pricing and see as a photo and pharma tougher.
The reunion.
To provide more details on platform and the pipeline candidates, we have been working on.
I have been working together since 2004.
When I served as the CEO of <unk>.
Cogent, Inc.
We later found the Fujian therapeutics together in 2011.
Yes.
Thank you mean I'm pleased to be here today to discuss the pharma business.
You mentioned, we have been working together for many years in addition to <unk> I.
I also found it A&P technologies, Inc.
Hello, Biotechnology based company.
And has served as its CEO and CTO since its inception.
Prior to that I work at the U S Army Research Laboratory and managed is mono biotechnology for chemical and biological Defense program.
Our efforts at farmer are based on a novel novel drug delivery platform technology capable of delivering various water insoluble or poorly soluble drugs.
Unlike some of the drug delivery of materials, such as human serum albumin or HSA, which is only solidly in water our nano dropped delever if materials used for drug candidate development.
Our solid will not only water, but also in various organic solvent.
Well its capable of hotmail mixing with active pharmaceutical ingredients or API.
We believe these advantages will allow us to generate a much broader range of drug candidate formulations.
Clearly <unk> drive candidate formulations, which can be used for both IV and oral formulations with a goal to improve pharmacokinetics or PK profile.
As well as safety and efficacy.
With this platform. We believe we have the opportunity to use a 505 approach to shorten development timelines.
For active pharmaceutical ingredients or API that the FDA has previously approved.
This plug and play approach allows for multiple shots on goal.
<unk>, our development, therefore, PV off more chances to win.
In addition.
The simple manufacturing process also lowers the product costs significantly.
Our lead drug candidate <unk> seven has a manageable safety profile with maximum tolerated dose not reached at 125 milligram per square meter per week.
In a phase one clinical trial dosing at 160 milligram per square meter per week.
Ongoing.
The phase one trial is being conducted by the University of Southern California in collaboration with the National Cancer Institute.
We have all served a preliminary evidence of anticancer activity in heavily pretreated patients across different tumor types for example, inherent lag and ancillary cancers as well as checkpoint inhibitor resistant cancer patients.
So far in the phase one trial, we have not all observed any serious side effects related with peripheral neuropathy.
You see the same nano drug delivery platform, we have generated a deep pipeline of wholly owned drug candidates focused on Cadillac pancreatic lung breast and colon cancers.
In addition to our lead candidate <unk> seven we.
We have two other drug candidates one for colon cancer and the other is on NCS or new chemical entity targeting <unk> pathway.
Which has also been tested extensively in preclinical studies.
If we were able to continue developing our video was 735 O five Btu policy.
We expect to begin phase II and III trials in two to three target indications in the next one to two years with data Readouts over the next three to four years.
We also have a robust preclinical pipeline, which includes additional final <unk> and a novel and CES therapeutic candidates for example, multi kinase inhibitors and <unk> inhibitors potentially for additional oncology related indications.
We believe our genomic database can further fueled the discovery and the development of additional new drug candidates.
Which can potentially address various unmet needs such as drug resistance.
Through precision medicine to cancer patients as.
As Biomarkers play a key role in creating these targeted therapies.
I will now turn it back to me to wrap up on the transaction.
Yeah.
Thank you Ray.
This transaction is reinforced.
My commitment to both business.
The IBD.
<unk>.
Realize our vision.
A week ago integrated solutions to potentially come back.
Based on our current studies and the pre designed to criteria. We believe we have a proof of concept.
Paul Kennedy he had.
The initial target indication for head and neck cancer.
Attractive entry point, and possibly rapid commercial organization.
And assuming regulatory approval.
A part of.
The piece in therapeutic a second.
In long term, we have the opportunity to leverage its data inside from diagnostic businesses to Ian <unk>.
April precision medicine through proprietary a positive development strategy.
We continue to grow our businesses.
Organic investment.
Strategic M&A.
I will now turn over the call to Brendan.
Our chief commercial officer to talk about our diagnostics business results during the third quarter.
Brendan.
Turning to our core business, which we define as our sales minus all COVID-19 related testing, both PCR and <unk>.
Core business revenue was $56 million in the third quarter compared to $27 million in the same period, the prior year and $45 million in the second quarter of 2022.
Representing 110% growth year over year, and 24% growth sequentially.
Our investments important oncology pharma services, CSI and informed diagnostics are performing well as we begin to tap into the synergies across the business unit.
With our diversification into oncology and pathology added to our robust test menus for pediatric genetics reproductive health hereditary cancer neurological conditions and more we have created one of the largest test menu in our industry.
Not only do we offer one of the largest test menus. We also continued to excel as it relates to turnaround time depth coverage reliability of CMV calls with proprietary algorithms ease of use and access with customer portals and interfaces along with the ability for our clients to customize their gene panels.
Historically, we have served as a reference lab for many hospitals academic medical centers and commercial laboratories. However, now with direct access to the payers and over 300 million covered lives will be able to address the commercial pay market.
This opens up an entirely new channel for Fulgent.
That said, while we had hoped we would have these contracts rolled up with the ability to sell into for the fourth quarter. It is taking a bit longer than we predicted we now anticipate the contract rollout will be completed by the end of the year, allowing us to penetrate the direct pay market starting in 2023.
Paul will address our Q4 forecast in detail, but at a high level, we are projecting our core business at $52 million down sequentially, However, up 86% year over year.
The sequential decline is due in part to significant seasonality in our inform diagnostics business related to a drop in elective surgeries and procedures around the holiday season as well as the delay in managed care contract roll up and the delayed adoption and reimbursement of Helio liver. We view these as transitory and expect our business to gain momentum throughout 2023.
On the sales team front, we have recently completed a comprehensive cross training for the legacy folding sales team and the new inform diagnostic sales team along with restructuring to align with our corporate go to market strategy.
This is accomplished two things a greatly increased our sales coverage for the <unk> diagnostic products and it brought together the sub specialty sales teams to take full advantage of our product portfolio and synergies.
In terms of synergies. We are currently focused on penetrating the large <unk> client base with forging products for example, selling our hereditary cancer test the gastroenterologists and urologists for hereditary colon cancer and hereditary prostate cancer panels, respectively. These are just two clear examples in addition, with our specialty offering in nerf.
We are testing <unk> has established.
A very large national adult neurology client base as we get our contracts rolled up these clients are the target audience for our adult neuro genetic test, which now has the menu of over 80 unique panels.
As we mentioned on previous calls there were several territories, where <unk> had not had a historical sales presence, but has the necessary contracts to sell we see these as green territory and we have now placed rep and several.
Total size of the sales team is now right at 50 people, including our pharma services and oncology Division.
A quick update on helio liver.
We have now onboard at over 90 clients we.
We generally view these as the early adopters. Unfortunately, even as early adopters that have not fully integrated helio liver into their patient care.
We believe this is just a matter of time. However, there is still work to be done to get there. For example, many clinicians want to see practice guidelines before widescale adoption or local coverage determinations. We believe the climb prospective study is a critical piece of evidence to drive to the endpoint.
Recruitment for the study is complete and the team is aiming to publish the data in the second quarter of 2023. In addition, we expect helio liver to be submitted to the FDA in the third quarter of 2023.
Turning to COVID-19.
The U S is now in a much better place with Covid with cases steadily trending down since summer.
In addition, many of the screening programs have been stopped including employee screening in back to school programs.
This has all happened much faster than we predicted however, since the early days of COVID-19 has been very difficult to predict the state of the virus and testing.
To adjust to the rapid decline and remain cost efficient we have shut down our Houston operation and scaled back operations at Temple City.
We have significantly reduced the operational costs to support COVID-19 testing by right sizing our lab team to support the remaining test volume.
We still maintain the laboratory infrastructure. So if needed we can ramp back up support high volume COVID-19 testing very quickly.
I will now turn the call over to our Chief Financial Officer, Paul Kim Paul.
Thanks, Brandon revenue in the third quarter totaled $106 million compared to 228 in the third quarter of 2021 in line with our overall guidance of approximately $105 million available.
Billable tests in the quarter totaled 952000 compared to $2 2 million in Q3 of last year.
Year over year decline was again due to COVID-19 testing dynamic.
Breaking down revenue a bit further roughly $50 million came from COVID-19 testing in Q3 compared to our guidance of $51 million revenue from our acquired business totaled $56 million, which exceeded our guidance by $54 million and grew 110% year over year.
As a reminder.
Our core revenue includes our Ngls business contribution from our JV, CSI and inform diagnostics and excludes NDS COVID-19 testing from the CDC.
Demand for covered PCR testing remains volatile and generally trending lower we continue to take a conservative stance on expected revenue from Covid testing.
We remain focused on executing on our pellet covered growth opportunities, which include the integration of inform diagnostics expanding the reach of CSI capabilities executing on additional investment and partnership opportunities ongoing work.
Helio on joint commercialization.
And growing our footprint.
Sorry.
Our ASP in the third quarter was $111 higher than the 94, we saw in the second quarter of 2022.
ASP is fluctuated along with a mix of Covid testing cost per test for the quarter was $63 versus 45 in the second quarter of 2022, largely due to the shifting mix away from Covid testing.
More of our core testing, including testing from informed diagnostics as a reminder, our cost per test on our core portfolio can be as high as $200. So lets cover testing continues to decline the average cost per test will increase to a more normalized level for our card genetic testing.
Portfolio gross margin was 43, 6% down 37 percentage points year over year and down eight percentage points sequentially. The reduction in gross margin, but again data testing mix, including higher costs associated with our core genetic testing portfolio, including testing from inform diagnostics we.
<unk> gross margin to be under pressure in the fourth quarter as our anticipation from Covid revenues will be very low combined with lower <unk>.
Expect core revenues in our previous guidance, which I'll elaborate in the guidance section of the call.
Now turning over to operating expenses total.
Total GAAP operating expenses were $45 7 million in the third quarter.
One from $52 5 million in the second quarter of 2022.
non-GAAP operating expenses totaled $37 million consistent with last quarter.
non-GAAP operating margin decreased 13 percentage points sequentially to 11%.
The expense structure of our legacy Folgers business remains lean we have incurred a number of incremental expenses are part of our recent acquisitions as expected.
We have made significant investments in people infrastructure and operations to support our growth and these investments are putting pressure on our operating margins for the near term.
We remain confident that these investments will translate into demonstrate about ROI and drive outsized future growth of our core business at the same time, we're pleased with our ability to still generate positive EBITDA and cash flow. During this transformative time for our business.
Adjusted EBITDA in the third quarter was $19 7 million compared to $167 3 million in the third quarter of 2021.
On a non-GAAP basis, and excluding equity based compensation expense intangible asset amortization and restructuring costs and acquisition costs related to inform diagnostics income for the quarter was $9 8 million or 32 cents per diluted share.
$30 9 million weighted average shares outstanding.
Turning over to the balance sheet. We ended the quarter. We ended the third quarter with approximately $918 million in cash cash equivalents in marketable securities we generated $28 million of cash from operations during the quarter. Despite the significant investments we made in our business in the quarter.
I'd also like to highlight that we were active with our share repurchase program in the third quarter, we repurchased over 780000 shares of our common stock with an average with an aggregate cost of $34 7 million at an average price of $44 49 under the stock repurchase program announced in.
March as of September 32020 to a total of approximately $204 million remained available for future purchases of our common stock under the stock repurchase program.
In addition, subsequent to September 32022, we repurchased another 244000 shares of our common stock for an average.
Aggregate cost of $9 1 million at a price of $37 33.
Moving onto our outlook for 2022, we.
We saw a sharp drop in demand for Covid testing orders in Q3 as such our expectations for Q4 cohorts have changed significantly.
We now anticipate approximately $8 million of code revenues versus the previous expectation of $54 million dusk.
This translates into 433 million of covered revenues for the full year inclusive of the $425 million. We did in the first three quarters of the year as stated in the past revenue from Covid testing is daina nice lifted our business so very difficult to project.
Moving onto our core revenue guidance, which will include contribution from informed diagnostics.
We now expect core revenues to be approximately $178 million for 2022, representing a growth of 92% year over year, which takes into account. The outperformance. We achieved in Q3. This translates into guidance of $52 million in core revenues for the fourth quarter the.
The weakness in our core revenues.
Is attributable to falling short on anticipated revenues from Chile to lever combined what that utilization and capitalized capitalizing of reimbursement contracts from the acquisition of informed diagnostics as well as seasonality.
We see these issues as temporary and believe we will be back on track to grow our business again in 2023.
With $433 million in total revenues and $178 million and core revenue. We expect total revenue to be approximately 600 $611 million for the year.
We expect there.
There will be continued volatility with COVID-19 testing and remain focused on executing our strategy to drive momentum in our core business.
From a profitability standpoint, we remain focused on investing in our business to drive sustainable long term growth that being said, we expect to see meaningful pressure on operating margins in the quarters ahead, as we integrate and further invest resources of our recent acquisition <unk>.
<unk>, our conservative assumption for Covid testing demand.
Well result in lower gross and operating margins relative to the record high margins, we experienced during the credit crisis.
Long term, our foundational technology platform supports a strong margin profile and we'll continue to manage our spending with discretion to drive operating leverage.
Our full year 2022, utilizing a 28% blended tax rate and a share count of $32 million. We expect net non-GAAP income of approximately $5 60 per share for our shareholders, excluding stock based compensation amortization of intangible assets restructuring cost.
And acquisition cost to inform diagnostics as well as any other onetime charges.
The third quarter marked a notable milestone for fulgent with core revenue exceeding covered revenue for the first time since the early days of the pandemic. We have also set the bar for our core business at half of our $200 million annual revenue run rate going forward, even with the anticipated weakness in our Q4 revenue guidance.
Shifting gears with the acquisition of <unk> pharma, we anticipate reporting on this business segment separately going forward, which will include capital and cash requirements to fund our robust pipeline.
Also be reporting on progress of key milestones at this business on each of our earnings calls.
Our updated guidance is posted in the slides on our Investor Relations website, which show the detailed breakout I just discussed the pharma slides. We just presented today are also posted on our website as Melanie mentioned.
Thank you for joining the call today, operator, you may now open it up for questions.
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Our first question today is coming from David Westenburg from Piper Sandler Your line is now live.
Hi, guys.
John Peterson on for Doug Westenburg, Thanks for taking the questions and congrats on the lift from the poultry farm, that's a really exciting opportunity.
So first off just like the.
Ask.
Your implied.
The organic growth rate it seems like very high for your core business can you talk about how you were able to pick up so many hospitals so much volume during the pandemic.
Yes, just how that's been going for you. Thank you.
So David Thank you for the offer.
The questions I think because of the we.
We also saw that none of.
One of our major businesses during the past two years has been the COVID-19.
We are very proud to be part of the company.
Combining the pandemic.
Pandemic.
As the pandemic.
We've seen getting to the end does is a very good sign for the for the country and for the entire economy.
But we are always has been trying to invest.
In the the resources, we have to see how do we build a long term growth.
As you'll see we announced that we have.
<unk> core revenue has outperformed the KOL event revenue for the Q3.
Part of the revenues, we have is from the our acquisitions from the CSI and influence inform.
Back analysis.
It will take us a little more time to.
To build a more efficiency from these acquisitions and integrate them with our.
But genetic testing business, but we.
We see the us.
Strategy has been working for us, but it's definitely we're adding the our new acquisition. We felt we announced today, we hope it will feel that even with a solution not only focus on the technologies, but the increase of the complete solution, which is the patient's care.
Yes.
Great. Thank you and also.
Next if you could just.
Just talk to me about.
Given that the Covid revenue the guidance has come down how should we think about the underlying margins.
Going forward given that Covid is trailing off.
Thank you.
Yeah, So I'll take that one.
The biggest surprise for us during the quarter was the drastic drop off and they covered.
Testing demand, which we incorporate it into our conservative covered guidance for Q4, and because of a sharp drop off it's going to take us a little bit of time. Our guests is one to two quarters for us too.
Realigned our investments are in our cost structure, particularly related to the covered on part of the business and then Brandon mentioned.
Temporary weakness and our ambitions for the core revenue, we believe that that will be back on track in 2023, So what were doing and what we have been doing is.
By realigning and restructuring our cost to make sure that even on our intermediate basis that our margin profile and our leverage.
Is there and we believe that that will take one to two quarters for us too.
Just and then once we're back on a growth path for our overall core business without counting too much on Covid, we anticipate.
The weakness that we anticipate in the margin profile for our Q4, two I'll start grading up again.
Great. Thank you and also about the Fulton pharma acquisition.
You mentioned several different indications that you could potentially be going after.
Within the next.
Coming here is are there any of those in particular that you're most interested in because there were several that were mentioned thank you.
Yes, Thank you David.
The first though.
We are from the depot, we have so far.
We have worked with the indications will initially focus on head and neck cancer.
The other area.
Wishes of areas lacking of the.
Plus.
Some of the therapies.
The also the indication we have with the pancreas.
And Hillary.
And in the <unk>.
<unk>.
The other disease.
But the in terms of the pipeline. We also see our are strong.
Cancer, Kennedy, which as opposed to focus is on the colon cancer.
That drug is the we're trying to push et cetera.
The clinical research approaches as.
As we push into the as soon.
That's possible.
To the clinical trials. So we will provide that update once we get the business integrated.
When we meet with the FDA authorities.
Great. Thanks for taking my questions.
Thank you Dave thank.
Thank you as a reminder, that star one to be placed in the question queue. Our next question is coming from Dan <unk> from Credit Suisse. Your line is now live.
Hello, and thank you.
Is there any way you could frame for us the cash and capital needs of the pharma business over the next call. It one to two years.
Sure.
Take that on and then <unk>.
After my comments at Meng and Ray have any.
Additional comments to add.
The capital needs for the pharma business for 2023, and 2024, we believe wont be.
That significant we anticipate that the totality of the painful and each of the years will be somewhere in the mid teens, so anywhere from sites.
$6 million of our cash needs and.
We believe.
The advantage that we have is theres been a lot of work and investment that went into a pharma asset as Ming indicated from assumption in 2011, so again the capital needs.
For the next couple of years should be in the 15, 16, maybe $17 million per year.
So it's not going to disrupt the capital Optionality that we have on our cash position for the company.
And.
It will you'll see we started in Bern.
More than that.
As Paul indicated and thus is a good sign that doesn't mean that we are working provide some kind of excellent accretion in terms of development or the new drug candidates are getting into the clinical trials.
And then for my follow up question co brand and I wasn't sure I fully understood. The contract roll up feature you were talking about with your guidance could you circle back to that and maybe elaborate on what's evolved differently than plan.
Yes, certainly thanks for the question, it's just mechanics, Dan so.
Those contracts need to be assigned two folds it.
We have to work with the payers to do that so just mechanics, just contracting just pushing paperwork.
And it's just taking longer than we predicted.
I don't know if theres any reason behind it staffing shortages I don't know, but it's just mechanics, taking longer than we thought so once they are all rolled up to the corporate level.
Then we will have be able to deploy those contracts across our various entities.
And then final question.
You mentioned, the new $200 million baseline in revenue for core Paul Jan do you have any framing thoughts for us on how rapidly you think that could grow in 2023.
I believe.
Our intention for.
Or any kind of investment that we make is to grow faster than the marketplace and because of our diversified portfolio and the overall market reach that we have.
We wouldn't be surprised if the.
Growth.
The growth of our overall business is anywhere from say like.
Maybe like 25, 2025% range I mean that would be the goal that we have at the moment I mean again, we're going to be laying out guidance. When we announce the next quarter call for 2023, So we'll have more specified ranges.
And details that we can talk about at that point by our intention has always been to grow faster than the marketplace.
Thank you.
Thank you we reached end of our question and answer session and ladies and gentlemen that does conclude today's teleconference and webcast. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.